Boring Is Better

With holiday season in full swing and many more festive gatherings to come you may find yourself having conversations around the state of our economy, the cost of living, possibly even how your portfolios may be preforming, or more likely, how they are not preforming.

As we have watched the market react through this cycle of underperformance one thing has remained true, there is beauty and pride in proven investments. To paraphrase investor Jim Grant: Knowledge in some fields is cumulative. In other fields it’s cyclical (at best).

Let’s create some context, In the 19th century it was common for surgeons to reject the concept of micro bacteria, also known as germs. There was no process of sterilization when preforming surgery, which led to many infections and later a general knowledge of germs. This seems unfathomable to you or I reading this now but, like many things in life, it took countless mistakes to create a form of “Cumulative Knowledge” in the field.

For some reason this form of knowledge seems to pass over a large majority of the investment community. Although we have vast knowledge, an abundance of research and thousands of examples of different investment philosophies and strategies over time. Time and time again human behavior has not drastically varied through market cycles. The majority of investors participate in this form of “Cyclical Knowledge” mentioned by investor Jim Grant.

Let’s look at this mathematically -

 We have spent the last decade in a flourishing economy where nearly anyone from anywhere could create wealth in the equites market, in the last 12 months this entire concept has drastically changed. The majority of stocks are down year to date and all of the main indices listed above have suffered losses, although not in equal proportions.

Those boring old blue-chip stocks that pay a nice dividend and have strong cash flows are looking as bright as ever. Rather than the trendy investments in crypto currencies, blockchain, robotics, cyber security, and many more innovative concepts. It is time to be more methodical and rational in our investment philosophies.

Success in the stock market should look boring! You will not be sitting at the dinner table talking about your hot stock tip that doubled this year. Or how someone you work with got rich overnight on a hot investment.

This is not a proven way to create wealth. Diligence and patience are the greatest tools you possess in order to create lasting wealth. This sort of thing takes decades not weeks.

Invest continually over long periods of time, keep fees to a minimum, and wait patiently over years and decades to effectively build wealth.

This is not a declaration that index funds are the only answer to success in the realm of investing. I too enjoy variations of asset allocation; yet, this is a reminder of the importance of these strategies when considering the portions of your financial plan that are crucial to your retirement. As well as a reminder to be diligent in where your money is and who is in charge of it.  

My encouragement to you, as you hear those stories of large gains and news articles of the next big thing, find a way to stay true to the fundamentals. Understand although someone may be holding a hot stock up 80% odds are the rest of their holdings are suffering, they just failed to mention it. Exciting investments may have had their time in the spotlight but one thing will remain true over centuries. Boring investments do not have an ego, boring investments always have been and always will be sexy. 

Wealth is Built Over Time.

 Fiduciary Financial Advisors is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.